Factories May Be Coming Back To The U.S., But The Jobs Aren’t: McKinsey

Zero Hedge – by Tyler Durden

Trump effectively owes his election to the promise of bringing factories and manufacturing jobs back to the United States.  His relentless, targeted attacks against the ‘Big 3’ U.S. auto manufacturers for outsourcing jobs to Mexico was undoubtedly a key reason that he was able to shock the world and win Michigan, Wisconsin, Ohio and Pennsylvania…an accomplishment which has eluded Republicans since Ronald Reagan.

Unfortunately, while factories may once again be making a comeback in the United States, after chasing low wages all around the globe for decades, they’re unlikely to bring the jobs with them.  As a new study from McKinsey highlights, if a new factory opens up in the United States you can bet it’s only because most of the jobs that used to be performed by humans have since been automated.  Per Bloomberg:  

American manufacturing could be poised to rebound as technological disruption shakes up global production chains, but that will offer little relief to displaced factory workers, according to new research by the McKinsey Global Institute.

Now, McKinsey sees conditions changing in a way that could favor U.S. producers: automation is weakening the case for labor arbitrage as wages rise in emerging market economies and developing market residents are coalescing into a new consumer class, among other factors.

While the U.S. could seize on those manufacturing growth opportunities, especially if the government and companies invest to make production more competitive, there are catches. Importantly, production might bounce back without bringing a lot of jobs in tow.

“Even if we rebuild factories here and you build plants here, they’re just not going to employ thousands of people — that just doesn’t happen,” said report co-author and McKinsey Global Institute Director James Manyika. “Find a factory anywhere in the world built in the last 5 years — not many people work there.”

Not surprisingly, the biggest beneficiary of the decimation of the America’s manufacturing base has been China…which also means they have the most to lose as those jobs get automated.

Value Add

Looking at the likelihood of automation by industry, McKinsey finds that factory employment ranks near the top of the list — behind accommodation and food services and just ahead of agriculture. Investment in re-training could help employees who are displaced, Manyika said, but it won’t happen overnight.

“It’s a bit of a heavy lift — in the skilling, the investment in the right places, the right skills — it’s not going to happen by itself.”

Of course, this wouldn’t be the first time that economists had prematurely predicted the demise of labor markets due to technological advances:

“We are being afflicted with a new disease of which some readers may not have heard the name, but of which they will hear a great deal in the years to come—namely, technological unemployment” – Keynes, 1930

“Labor will become less and less important. . . More and more workers will be replaced by machines. I do not see that new industries can employ everybody who wants a job” – Leontief, 1952


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